Updated from 5:50 p.m. ET with CME Group statement raising margins on gold.

NEW YORK ( TheStreet) -- Gold prices plummeted for a historic two-day collapse on Monday as liquidation pressure and long-only funds continued a huge selloff in the yellow metal.

Gold for June delivery on the COMEX dropped $140.30, or 9.3%, to $1,361.10 an ounce. The gold price traded as high as $1,495 and as low as $1,355.30 an ounce. The spot price dropped $124.40 an ounce, according to Kitco's gold index.

Monday marked the largest percentage drop in gold since Feb. 28, 1983, when the price dropped 12.1%, according to Bloomberg data.

"There are an awful lot of people hurt, there's any number of rumors, innuendo, theories as to why this has occurred, but the public was long of gold," Dennis Gartman, editor of The Gartman Letter told TheStreet. "You had a perfect storm of circumstances prevailing: you had technical chart patterns being broken, you had the Cyprus situation, you have the GDP in China, you had the backwardations in crude oil beginning to narrow dramatically . . . you have a new crop of corn that looks like it's going to be sizable being planted."

Gartman said all of this added up to an impending perfect storm of liquidation.

On Friday, prices broke through multiple levels of technical support and many analysts have suggested in interviews that the yellow metal's break below about $1,525 an ounce triggered the two-day free fall the market has seen. Simply, traders continue to test lower bounds to see how far gold will drop before buyers reenter to stabilize prices and reestablish new long positions.

Some investors were looking for a bottom in gold's drop, and some prominent fund managers remained optimistic, despite Monday's tailspin.

"We set up the gold share class at an average cost of around $950 in April 2009 and while it's down from its peak, it's up considerably from our cost," John Reade, partner and gold strategist at Paulson & Co., said in an email. "While gold can be volatile in the short term, and is going through one of its periodic adjustments, we believe the long term trend of increasing demand for gold in lieu of paper is intact."

Central banks, including the Federal Reserve, European Central Bank, Bank of England and Bank of Japan, among others, continue to stress their commitment to monetary easing policies. The Bank of Japan announced on April 4 a massive monetary stimulus program that would include $520 billion in government bond purchases over a 12-month period.

These easing policies, combined with economic uncertainties in Europe, have led many analysts and investors to believe buying potential remains in play for gold.

Reports emerged last week that Cyprus is selling its gold reserves, which has led many investors to wonder if struggling nations like Portugal and Spain will also begin to liquidate their gold holdings in exchange for more capital.

Chinese gross domestic product grew 7.7% in the first quarter of 2013. The figure trailed economists' expectations of 8% growth, according to a Reuters poll, and receded from the 7.9% growth the country saw in the fourth quarter of 2013.

Silver prices for May delivery sank $2.97 to $23.36 an ounce, while the U.S. dollar index was gaining 0.21% to $82.30.

"One of the problems I think . . . is the fact that gold investment for many has almost become religious; by that I mean there was nothing really that would call for lower gold prices, only higher," Ole Hansen, head of commodities strategy at Saxo Bank, in a phone interview from Copenhagen. "A lot of people have been clinging onto this investment throughout the last six months . . . but you could easily find arguments convincing yourself you are on the right idea."

Ole said his projection for 2013 has been gold at $1,200 an ounce.

Gold dropped more than $60 an ounce on Friday as the precious metal crashed through multiple levels of technical support, which signaled a shift to a bear market. But electronic trading in the late hours of Friday signaled the gold selloff had not reached a bottom, Phil Streible, a senior commodities broker at RJO Futures, said in an interview.

"At the end of Friday's electronic session the market was about $40 lower than the settlement price, so these people would have to . . . meet the losses," Streible said. "So over the weekend you saw a lot of traders reassessing their positions, and not only individual traders but these are also large funds and hedge funds as well that are forced to liquidate."

Liquidation pressure and long-only funds on Monday -- similar to Friday's trading action -- were continuing to sell off their positions.

The dip below $1,400 an ounce marked gold's lowest levels in more than two years.

The selloff also has triggered a negative reaction across commodities markets.

May crude oil futures dropped $2.58 to close at $88.71 a barrel on the New York Mercantile Exchange.

"There has been no single fundamental catalyst for the panic selling in the gold and silver markets," Jim Wyckoff, senior analyst at Kitco.com, wrote in a note. "But the fear in the commodity trading world is pervasive Monday morning, which has most commodity futures markets and world stock markets under selling pressure."

Veteran gold and commodities analysts were calling the Friday and Monday drop a historic event.

"In 40 years of watching gold I have not seen anything like this," George Gero, precious metals strategist at RBC Capital Markets, wrote in a note. "The continued sharp setback is due to margin calls, risk managers prompting cash raising, and bouts of bargain hunting as some begin to take longer term positions."

As for Monday's action, it was difficult for funds and individuals to find the confidence to jump back into the gold market.

The CME Group said late Monday that it increased the deposit for an initial account on gold futures to $7,040, up from the previous amount of $5,940. The CME also said it increased margins for silver, platinum and palladium.

Gold ETFs tumbled on Monday. SPDR Gold Trust ( GLD) was off 8.8% at $131.31, while iShares Gold Trust ( IAU) lost 8.9% to $13.19.

Gold mining stocks also took a huge hit on Monday. Shares of Barrick Gold ( ABX) dropped 12.6%, and the junior mining ETF Market Vectors Junior Gold Miners ( GDXJ) skid 12.5%.

-- Written by Joe Deaux in New York. With additional reporting from Antoine Gara

>Contact by Email.

More from Gold

Market Bears Have Devoured Gold Prices

Market Bears Have Devoured Gold Prices

Gold to Skyrocket as Italian Rebellion Unfolds

Gold to Skyrocket as Italian Rebellion Unfolds

2010-Style Crisis Approaches: Prepare For Flight To Safety

2010-Style Crisis Approaches: Prepare For Flight To Safety

Gold Prices Look 'Rich' at Current Levels - Here's What Could Change That

Gold Prices Look 'Rich' at Current Levels - Here's What Could Change That

Watch This If You're Wondering How Much Gold to Have and When to Sell

Watch This If You're Wondering How Much Gold to Have and When to Sell